MENA entrepreneurs challenge rising unemployment by setting up SMEs

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View of a graduation ceremony being held at a Jordanian university. Hundreds of thousands of Arab students graduate from universities every year, adding pressure on the job market. Photo - desertwok.wordpress.com

A growing number of youth in the Middle East are taking the entrepreneurship route as unemployment rates remain stubbornly high. According to the International Labour Organisation (ILO), the Middle East will be facing an increase in unemployment as figures are expected to rise to 10.3% in 2012 from 10.2 percent in 2011.

A report published by Ernst & Young, one of the world’s largest professional service firms, also confirmed the trend and said over 15 million young people are expected to enter the workforce in the Middle East and North Africa during the next decade. The firm’s quarterly Rapid-Growth Markets Forecast said the region’s greatest challenge will be “to tackle rising unemployment and expand the non-oil economy”.

“While a growing labour force adds to potential growth in the region, creating jobs for this next generation in MENA will be one of the most important economic developments,” Bassam Hage, MENA Markets leader Ernst & Young, said while adding that a 2% per year growth will be the average annual growth rate in the Middle East and North Africa (MENA) labour force in the next decade.

The finding also urges the governments to promote entrepreneurship in MENA and create the right environment for new businesses to flourish. It also called on measures to develop the non-oil economy, spend more on education and training and ensure targeted public spending on infrastructure projects.

UAE INITIATIVES

The report noted that the UAE is enjoying a healthy business growth, as half of all businesses in the UAE intend to hire new staff in the upcoming months. Analysts believe that the UAE government’s job creation mission is better off than many of its neighbouring countries. Meanwhile, Ernst & Young said that GDP growth in the UAE has been supported by the oil sector, tourism and business services as well as government spending.

“The UAE economy has been insulated somewhat from the problems in the eurozone through close links with the fast-growing Asian economies,” Ernst & Young added.

Many locals in Gulf region have been suffering from unemployment/underemployment as expats manage to fill in positions easily and demand less salaries when compared with the native workforce’s pay. As a result, schemes such as ‘Emiratisation’ – an initiative taken by the UAE government to employ more nationals in a “meaningful and efficient manner” in both the public and private sectors – have boosted employment among locals. While the programme has been in place for more than a decade and results can be seen in the public sector, the private sector is still lagging behind as Emirati citizens represent a mere 0.5% of the private sector workforce. The UAE’s expat population is more than 8 million while the native population is roughly around 890,000.

NEIGHBOUR’S WOES

Oman is another country in the Gulf region that is working on addressing the same issue, but has taken a different approach. Omani authorities have increased the fees of obtaining a Work Visa in order to make it more difficult for expats to work there while allowing locals to be hired for advertised positions. The native population of Oman is 2.4 million while their expat population is 577,000. In 2005, the unemployment rate in Oman was 15% which has increased during the recent years. Protests against unemployment took place in different towns and cities of Oman in March of last year. According to the Monster Employment Index, Oman saw a 12% decline in its online job postings, as opposed to Saudi Arabia which saw a 56% increase in the same area.

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Candidates taking part in training programme titled 'Bank Risk Management' and 'SME Banking' in the Middle East held by the Bahrain Institute of Business and Finance (BIBF) in collaboration with International Finance Corporation (IFC) of the World Bank Group, Washington. Photo - Businesstoday-eg.com

The scale of this problem is made clear by the findings of the International Monetary Fund (IMF), which reported that in the last ten years nearly 7 million jobs were created in the GCC with less than 2 million of these going to Gulf nationals. It added that in 2010 there were 5 million employed nationals in the GCC and 4 million were expected to enter the workforce in the coming 5 years.

‘SHINING’ EXAMPLE

Meanwhile in Qatar, the opposite is true as employment officials said they are trying to convince executives from Western countries and other parts of the world to consider jobs in the region as construction companies look to hire hundreds of project managers, civil engineers and technical designers, despite recruitment challenges. The native population in Qatar is estimated at 293,000 while the expat population is around 1.95 million.

Bernhard Ward, country manager at Reed Global, Doha, said: “Those who know little about the region can only fall back on what they see on their television screens everyday and they assume that the troubles in certain parts of the region have affected every part.” Qatar already enjoys a low unemployment rate of 0.4% according to the CIA World Factbook, as demand for labour is at an all-time high thanks to the hosting of 2022 Football World Cup for which preparations are in full swing.

The E&Y report said large capital spending increases coupled with rises in wages, pensions and benefits for all state and military employees have helped boost the Qatari economy.

ENTERPRISE FUTURE

Following the long-term decline in employment in recent years as a result of political instability and economic uncertainty, youth and adults in the MENA region are turning towards entrepreneurship. Many regional studies suggest a growing number of entrepreneurs, particularly young persons, have been inspired to launch their own small and medium-sized enterprises (SMEs) in the region.

According to Carnegie Endowment Centre, there are currently 12 million SMEs in the MENA region, which make up 95% of the private sector.

Oasis500 is a leading early stage and seed investment company set up by Jordanian entrepreneurs to meet the rising needs of upcoming entrepreneurs, the first company of its kind in the MENA region. The company began with a notion of building a new platform for entrepreneurship in the region by helping passionate ambitious entrepreneurs start their own companies. Soon it became an instant hit, confirming the fact that rising number of people are taking the entrepreneurship route despite challenges like restrictive business legislation and a lack of transparency regarding business by their governments which is hampering the emergence of entrepreneurship culture in the Arab world.

al azzam microsoft
Mohammed Al Azzam with Microsoft founder Bill Gates at the Microsoft Vision Center in Davos, Switzerland.

Mohammed Al-Azzam, a young Jordanian entrepreneur based in Amman, has received a $75,000 grant from Microsoft to start his own business. “I see a great potential in the market locally, regionally and internationally, which was further reassured by the great support and encouragement my team and I received from Microsoft in New York,” Al-Azzam said. He added that a growing number of people are investing in startups as “an escape plan from their day-to-day jobs.”

Another young Palestinian entrepreneur, Deena Omar, started her own successful self-funded baking business in 2010 when she was residing in Bahrain, after finding it difficult to find a job. “Starting up my business would have never been successful without the support and help of my friends in Bahrain,” Deena said while adding that more locals are employed in Bahrain than expats. Omar’s assumption is correct, as the native population of Bahrain is around 1 million while an estimated 235,108 expatriates are living on the island.

According to economy rankings by the International Finance Corporation (IFC) Saudi Arabia was ranked as number one as the country with the most business startups, followed by Egypt in second place, while the UAE took third place. Oman was ranked at number seven and Qatar at number 12.

(Written by Arwad Khalifeh; Edited by Moign Khawaja)

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